Insurance pools offer lifeline for small businesses

Robby Robinson, owner of Corporate Staffing, covers half the cost of insurance for Claudia Cadavid, at the reception desk, and his seven other employees. KEN OSBURN/Staff e-mail this story print this story More details * Workers in the smallest businesses that offer health insurance pay an average of 17 percent more than those at large companies. * Association Health Plans would save small-business owners 15 percent to 30 percent on premiums. Source: The Coalition Supporting Access & Choice Through Association Health Plans. Related Related Web site • More about the Small Business Health Fairness Act • More on Association Health Plans • More about the uninsured

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As the owner of a small business, he's not eligible for the insurance discounts that large employers get, and too many claims among such a small group would make his premiums unaffordable.

But a bill before Congress would enable companies like Robinson's Corporate Staffing to form an association with similar small employers to purchase group insurance that could mean average savings of about 25 percent, according to a group supporting the idea.

"That's pretty significant and enticing for me from a small business perspective," the Greenville man said. "It would be helpful in recruiting and trying to retain staff, too, and I could offer additional benefits by that savings."

Nationwide approximately 45 million Americans are uninsured and 51 percent are small-business owners, their employees or dependents, according to the National Federation of Independent Business.

About 538,000 people in South Carolina, or 15 percent of the population, are uninsured, according to the Kaiser Family Foundation. In Greenville County, more than 41,000 residents have no health coverage, and most of them are working, according to the Community Health Alliance.

"There's a very serious problem out there," said Susan Lill, owner of Align HR Services in Greenville and a member of a coalition looking for solutions.

"The National Federation of Independent Business conducted a survey (of members)," she said, "and the No. 1 issue is the inability to provide affordable health care coverage."

The bill, H.R. 525, would remove the regulatory barriers that currently prevent small businesses from forming association health plans, as they are known.

Supporters say AHPs will help provide health coverage to millions of Americans, many of whom work at small businesses, and their families. Opponents say the bill would leave consumers vulnerable to fraud, and that most uninsured people earn too little to afford insurance even if it was offered.

AHPs have been kicked around for years, said Edward F. Howard, executive vice president of the Alliance for Health Reform in Washington. Previous incarnations have passed the House several times in recent history, he said, but not the Senate.

Among the measure's supporters is the Association of Builders and Contractors, which represents 23,000 member companies with an average of 25 employees each. Most offer insurance now but are struggling to maintain it, said Joe Rossmann, vice president of fringe benefits.

Insurers typically demand higher rates from small employers, some as much as 35 percent more, and small businesses don't have the purchasing power to negotiate better rates, he said. Association Health Plans could change that.

"This would give them a bit of clout which they don't have today," Rossmann said. "And any profits would stay in the plan for the benefit of the folks being insured, not go to stockholders."

AHPs stand to help not just the construction industry, but all small businesses and the self-employed, said Mike Trammell, of Trammel & Cohen, CPAs in Spartanburg, and chairman of the Carolinas chapter of ABC.

"The largest single advantage to AHPs is to put more competition into the marketplace," he said.

The idea is attractive to Michael McGarry. The 45-year-old Simpsonville man co-owns Blue Ridge Consulting Services, a management consulting firm with three employees.

Two of them have insurance through their spouses, leaving McGarry to purchase costly individual insurance for his family that covers only major claims.

"We struggle to find affordable, comprehensive health care coverage for us," said the husband and father of three. "Having the option of going through an association would be wonderful. And we could be more competitive as an employer."

There's no doubt that high insurance costs depress the job market, said Mark Hatfield, of Hatfield Builders in Greenville, where premiums for 15 employees run around $5,600 a month.

"The cost is tremendous and the reality is it discourages us from hiring permanent employees," he said.

In the past four years, Hatfield said, his premiums have increased 53 percent. While the company absorbed about half of that, he said the rest had to be passed on to customers.

"You literally feel like you don't know what to do because you can't keep absorbing these increases," he said.

Jerry Fender tried for years to offer insurance to his 11 employees at the Merovan Office Center, but it was too costly. Thanks to a plan offered to members of the Greater Greenville Chamber of Commerce, he now can.

"Before we had a group plan through the chamber, (my wife and I) had individual coverage and the premiums were as high as what the business is now paying for coverage for everyone," he said. "But we're always (still) worried about the cost going up. There has to be some reasonable answer to this."

Howard said it's not likely that AHPs will significantly expand coverage among those who don't have it now because two-thirds of the uninsured have incomes below 200 percent of the federal poverty level. Their earnings go to rent, food and utilities, he said.

And while the current bill contains some better consumer protections than previous versions, he said there are still concerns they aren't strong enough. In the past, Howard said, similar situations resulted in a number of fraudulent insurance companies that bilked members out of their funds while others that were underfunded went belly-up.

Mila Kofman, assistant research professor at Georgetown University Health Policy Institute, said the bill would undermine existing consumer protections, thereby perpetuating insurance scams that left about 200,000 policy holders with $252 million in unpaid medical bills between 2000 and 2002.

Kofman added that the solvency standards set by the bill for these health plans also are inadequate. There have been four major insolvencies of health plans in recent years that left 65,000 people without coverage and the businesses $45 million in debt, she said.

"It's dangerous. There is a history of problems," she said. "If an insurance company goes under in the states, there's a fund that pays the bills. In this case, there is no guarantee fund that pays the bills."

Kofman said studies have found AHPs would only save money by cutting back on benefits and by insuring only the healthiest people, which would raise costs for everyone else.

"If you're healthy, it would be cheaper to get coverage through these associations, but sicker people would be left in the pool," she said. "It sounds good on paper, but it doesn't address the real reasons why prices are going up. Study after study says it's won't address the problem of uninsured — it would make it worse."

The bill also would eliminate state mandates for coverage, which critics say drive up the cost of insurance. But opponents of the bill said most mandates cover necessary care, like maternity benefits, and eliminating them makes it harder for consumers to choose between plans.

The industry trade group America's Health Insurance Plans also opposes the bill. AHPs would increase insurance costs and cause some people to lose coverage by changing the balance of the risk pool, said Mohit M. Ghose, vice president of public affairs.

But Sen. Jim DeMint said insurance companies simply don't want the competition, and that the federal government is up to the task of overseeing AHPs.

"AHPs aren't going to solve all our health insurance problems, but it will make it available to more workers," DeMint, R-Greenville, said. "It's part of a package to create more affordable and more available health plans for workers."

Howard doesn't expect the bill will go anywhere this year because there are too many factions, including the powerful insurance lobby, who think it's a bad idea.

Lill, who co-chairs the Health Coverage Committee of the Community Health Alliance and the Greenville Chamber, says that although the jury's still out on the viability of AHPs, they bear further investigation.

But the community does need to look to creative solutions, she said, like Health Savings Accounts, allowing the self-employed to deduct their health insurance premiums as a business expense, and splitting the cost of premiums between the business, the employee and another entity, such as government.

"We're all tired of droning on about how this is such a critical issue — and it is," she said. "But we need solutions."